An integrated and complete perspective about Enterprise Risk Management.

1. A NEW MODEL FOR RISK MANAGEMENT
INTERVIEW: ALESSANDRO DI FELICE, PRYSMIAN
ERM: GIVING YOUR FIRM A STRATEGIC EDGE
COREY GOOCH, BROKERSLINK & JOHN BUGALLA, ERMINSIGHTS
REMEMBERING FRANÇOIS SETTEMBRINO
JORGE LUZZI
ENTREPRISE RISK MANAGEMENT
ERM
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A new model
for risk
management

3. f u l l c o v e r
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Alessandro di Felice is Chief Risk Officer at
Prysmian, following a long career in risk
management. He has been heavily involved in
ANRA, the Italian Risk Management Association
and today is President. Jorge Luzzi, President of
Herco Global at MDS Group and António Fernandes,
Global Business Executive at Herco Portugal,
met Alessandro at an event promoted by MDS in
Porto, and talked to him about his career and risk
management.
Curiously, Alessandro began his career
not as a risk manager but as an insurance
broker in London, after graduating in
business administration at the university
La Sapienza in Rome. He tells us “this was
a very important experience, because
spending two years in the most advanced
marketintheworldforinsurancebrokerage
ensuresyoulearnallthetechnicalities,how
thisbusinessworksandthemostimportant
businessfundamental–totrusttheperson
you are doing business with.”
After a couple of years in London he
movedbacktoItaly,thistimetoMilan,still
in broking. In the late 90s Alessandro was
hired by Pirelli, in their risk management
department. As Jorge puts it: “You began
working on the other side of the fence.”
Alessandro agrees: “Yes, I discovered an
entirely new world and in the beginning
I was worried it might be boring in risk
management.Ifeareditmightbecometoo
repetitive, more or less always the same,
whereasinbrokingyouknowalotofpeople,
differentcustomersanddifferentactivities.
Butthiswasnotthecaseatall-ithasalways
beenafantasticjob,fromtheverybeginning
to this day.”
Jorge and António naturally agree –
they both know how it is to work in risk
management – after all they have many
years’ experience in this area too. Jorge
wanted to know how committed Pirelli
was to risk management at that time
and Alessandro went on to advise Pirelli
historically had one of the most evolved
risk management departments in Italy:
“They started in the late 70s, establishing
aninsurancemanagementdepartmentand
in the 80s this evolved into advanced risk
andinsurancemanagement.”Heexplains:
“Advanced means looking at a risk profile
with a different, more proactive approach,
ratherthanjustnegotiation.Inthe90s,when
Ijoined,therewerealreadyanumberofrisk
engineering, loss prevention, risk analysis
andriskprofilingactivities.Inthebeginning
these mainly focused on the insurable
ratherthannon-insurablerisks,butevolved
quicklytoembraceriskmanagement.Later
on, I became Risk Manager of Prysmian –
a spin-off from the Pirelli Group. It was
a specialist cable division of Pirelli that
becameacompletelyindependentcompany
andforthelastfiveyearsI’vebeenChiefRisk
Officer.Thismeansfiveyearsagoweadopted
a complete enterprise risk management
(ERM) approach inside the Company and
I became responsible for a number of risks
that are not typically insurable.”
Jorge, at this point, wants to know
who Alessandro reports to regarding
insuranceandenterpriseriskmanagement.
Alessandro is happy to clarify: “I report
to the Board of Directors, or rather to a
committee from the Board of Directors.
This follows the corporate governance
policy of the Company, where ERM is
integrated into its corporate governance.
Asatraditionalriskmanager,Ireporttothe
Group Chief Finance Officer, so fall within
the administration, finance and control
functions.”
Jorgeagreeswiththeplacementofboth
activities in one pair of hands but with
different areas of focus. He now steers to
another direction, asking Alessandro to
describe the risk management approach
of Italian companies, other than Pirelli,
in the 90s and 2000s. Alessandro thinks
for a moment and recalls: “I would say the
evolution of our profession has been more
orlesssimilarinallotherlargecompanies.
WhenItalkaboutlargecompaniesitmeans
the100-120Italiancompaniesthatarethe
largest operating conglomerates in Italy,
typicallylisted,theyarealsomultinational
or have a number of multinational
operations.Therearefewlargecompanies;
95%oftheItalianeconomycomprisessmall
and medium enterprises and in this area
thingsareverydifferent.Historicallythey
have not been particularly interested or
focused in managing risks. However, at
the Italian Risk Management Association
(ANRA) we’ve noticed this has been
changing over the last few years, perhaps
as a result of the recent economic crisis.
“Manycompaniesunderstoodthataway
to face the crisis was to manage the risk
and try to control the volatility of results
– stabilising them to avoid unexpected
issues - and this really created and is still
creating a new risk management culture
in the country. I’m referring more to
medium-sized than small companies,
because small companies tend to be
family-owned by two or three people, so
very small. Another possible reason for
better risk management is that banks,
investors and customers started to
require feedback and reports on how the
risks are managed. I’m confident a risk
management culture is really growing in
Italy – as confirmed by what we see in our

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it has influenced the mindset of those
working in this area.
AlessandrohasbeenPresidentofANRA
for a year and actively involved in its
management prior to this. He explains:
“We invested a lot in enabling people to
access a wide range of information and
setuptrainingcourses,trainingmeetings
and workshops to educate people who are
asking for training. This is receiving very
positive feedback and interest is growing.
ERM has become very popular in large
companiesandthroughERMweareseeing
arediscoveryoftraditionalinsurancerisk
management.
This is because when you conduct a
risk profile analysis on ERM you include
a number of risk areas such as legal and
reporting,strategic,financial,compliance
andoperational.Inanindustrialcompany,
its key findings typically place insurable
risks at the top of the scale, but with this
new approach the level at which these
risks are reported and communicated
is much higher than before. They are
communicatedtotoplevelexecutives;the
Chief Executive Officer and/or the Board
and therefore the need to buy insurance
has become more ‘popular’ together with
otheraspectsoftheERM.Theyunderstand
the insurance market has the financial
capacitytoreduceexposuretotheserisks.
Clearlythereareotherareasofriskthatare
not insurable so still represent big issues
for companies.”
Jorge recently arrived from the annual
Risk Management RIMS conference in
San Diego California and commented
that several risk managers for large USA
companies mentioned insurers and
reinsurers are increasing their focus on
coveringnon-traditionalrisks;thingsthey
didn’t realise before were a real need of
their clients, but that risk management
associations were bringing to their
attention,saying‘youknow,ifyoudevelop
a policy to cover some balance sheet gaps
ofyourclients,andiftheinsurancemarket
acts upon this, technically you could do
some very profitable new business’. As
a result, the lobbying by regional risk
associations is generating new kinds of
covers by insurers.
Jorge wanted to know if this is also
happening in Italy. Alessandro replies:
“Yes, and taking this further, I think
the insurance market needs to study a
new business model. Something like
Alessandro di Felice.
Association where over the last one and a
halfyearswehavedoubledourassociates,
which is very unusual.”
Alessandrocontinues:“TheAssociation
isreceivingmoreapproachesfrompeople
whoarenotriskmanagers;theyhaveother
roles within their companies, but need to
identify the risks and understand how to
manage them, plus do some networking,
benchmarking and training activities.”
Jorge agrees: “The profession - the
activityofriskmanagement-isbecoming
morewidespreadinItalythaneverbefore.”
Alessandro adds: “Perhaps maybe not as
a full-time profession yet, but certainly it
formspartofaroleforsomeonewithwider
company responsibilities.”
Moving on from this, Jorge asks about
the work of the Italian Risk Management
Association(ANRA),howithascontributed
to risk management in Italy and whether
"I think the insurance
market needs to study
a new business model.
Something like an
‘insurance 2.0’"

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f u l l c o v e r
an ‘insurance 2.0’, which is: if a large
company integrates an ERM framework
into its corporate governance, conducts
anin-depthanalysisofpotentialscenarios
and evaluates its potential exposure, why
should the insurance market still only
considertraditionallinessuchasproperty,
liability, marine & cargo and personal
accident,etc?Whydon’tthey,forexample,
become some kind of company ‘partner’,
respond to the business risk management
plan and say ‘that is the risk that has been
assessed in your business management
plan, I will provide a certain capacity
just in case the outcome goes above your
expectations, or below them”.
He continues: “This would insure the
risk management plan rather than the
riskswithinit.Idon’tknowhowtodoityet,
clearly, I still don’t have the answer, but I
dobelievethisissomethingtobeevaluated
and studied in order to generate a new
business model. It is not just launching a
newproductlikecybercover,contingency/
business interruption or an evolution of
existing lines of business – this is about
completelyrethinkingthebusinessmodel.”
The discussion livens up. While Jorge
comments this would mean that not
only underwriters, but also clients might
suggestnewkindsofcovers,Antóniojoins
inandasksAlessandrowhatistheposition
of insurers on this, if they are open to this
kind of approach.
Alessandro’s opinion is that some
insurers are getting the message, but
cautiously adds: “I don’t know how open
they are and how willing because this is
a strategic issue for an insurer. I would
say that currently the insurance market,
togetherwithpartofthebrokerageindustry,
is in a very dangerous situation; there is a
lotofcapacityandbecausethepriceislow,
in certain lines of business insurance is
going to become a commodity. And if it
becomes a commodity, it will be easy to
accessandwillneedcontrolling.Thismay
mean cutting costs, reducing head count,
doing acquisitions, mergers etc. Only the
strong players will win – the others will be
completely erased from the match.”
António intervenes: “In a way, your
company,Prysmian,wantstoplaythisgame
becausetheywillmakehugeacquisitions”.
Alessandro agrees: “Yes, a part of our
business – low voltage cables - is in the
commodity market, so we know how it
works.Itworksbybuyingsmallcompanies,
cutting costs and getting the market share.
Wedothisbecausewedon’thaveanymore
margin to cut prices. You can only have a
margin if your costs are very, very low.
Otherwiseit’simpossible.Andtheinsurance
marketisgoinginthisdirectionrightnow-
it’sbeensomeyearsnowthat,ifatraditional
propertyprogramme,forexample,isgood,
anddoesnothaveparticularissuesinterms
of claims and frequency, it is easy to get a
discountinarenewal.Sowhatistheadded
value if the discussion is only about price?
Thisisdangerousforriskmanagementand
risk managers, because if at a certain point
insurance buying becomes so cheap and
easy to do, there is no incentive to invest
money in loss prevention, risk control or
risk management.”
Jorge and António agree. Alessandro
continues: “The capacity available on
the insurance market is enormous at
worldwide level. Insurers also have to
take into consideration, for example in
Europe, the introduction of Solvency II
rulesthatrequirealotofcapitalallocation
for granting the business, which means
an additional cost. So, I don’t know where
this market is going. It could be the right
moment to invent something completely
newthatisneitheraninsurancepolicy,nor
a financial product, some sort of hybrid.”
Jorgeadds:“Thatmightworkbyproviding
cover in case a strategic assumption of a
company is wrong or the scenario becomes
differentfromtheassumptionmadewhenthe
strategic plan was written, for example. It is
typicalofthewayweatherinsuranceworks.”
Switching to the subject of captives, Jorge
asks:“Prysmianisoneoftheoldestcaptive
ownersinItalyandfromyouroriginsoneof
thefirstinEuropetoo.Howisthisworking,
how much of a risk appetite do you have
with your loss prevention approach etc,
when using the captive?”
Alessandro replies: “I would say the
captive for us represents our level of risk
appetite in property, liability and credit.
Over the years, thanks to the positive
results, we have always kept profit in the
captive, generating more capitalization so
the captive self-financed itself, progres-
sively increasing the level of retention.
In traditional lines like property, liability
and credit, we are buying just capacity
from the market. All the frequency claims
are retained by us. There is a balance, it is
sustainableandourfocuswillcontinuetobe
ononlyinsuringveryhighriskevents,below
that our own company will cover the risk.”
All three would happily continue to
discussriskmanagement,butAlessandro
has a plane to catch. As they say their
goodbyes, it is clear this has been a very
interestingdiscussion.Andwhatisclearest
ofallisthatthesemenarepassionateabout
risk management. •
Alessandro di Felice with Jorge Luzzi and António Fernandes.

6. ERM
In many industries, companies are being pushed
by their regulators to implement Enterprise Risk
Management (ERM). However, the vast majority of
companies are not subject to a high degree of regulation
and are still pushing for the adoption of ERM. Perhaps
the reason that regulators and boards are so favorable
toward ERM is because of the strategic and operational
benefits that it makes possible, including:
• Increasing the chance of achieving strategic and
business objectives;
• The ability to see adversity on the horizon and
minimize its impact;
• The ability to take advantage of value-creating
opportunities such as a competitive advantage for the
future;
• Provides a process for board members to oversee risk
management activities as required in some countries.
With the introduction and adoption of ERM by many
companies around the world, an additional step
should be included in their ERM process. The new
step – planning – is critical to establish the context
surrounding the new ERM program. The planning
and preparation stage should take place before an
ERM program is initiated. It is at this point that the
organizations leaders should discuss how the ERM
program will be aligned with the organization’s
strategic objectives, and be utilized as a compliance
tool for regulators as needed.
Linking ERM to strategy
Too many ERM programs are initiated and championed
by a single individual or department from the bottom up
without giving adequate consideration to both the needs
and goals of the entire enterprise, which is a core concept
ofERM.TheresultisanERMeffortthatisnarrowlyfocused.
Forexample,anERMeffortchampionedbythecompliance
or regulatory group often becomes a compliance-biased
program.
Obviously,theseorganizationalcapabilitiesareimportant,
buttheyshouldbeconsideredwithintheoverallcontextof
the organization’s strategic goals. An ERM initiative that
takes a holistic approach in a culture that supports it will
notonlyleveragethebestriskidentificationandtreatments
alreadyinplacethroughouttheorganization,butalsohelp
to incorporate the same risk processes into the strategic
planning process.
When ERM is aligned with the organization’s strategic
and operational goals, ERM can also lead to strategic and
operational benefits. The methodology is to embed ERM
withinthestrategicandannualbusinessplanningprocess.
Becausethestrategicplansetsoutavisionfortheorganiza-
tion’sgrowthoveramulti-yeartimeframe,incorporating
theERMprocesswillsupport,nothinder,thestrategicplan.
The reason is straightforward: while the strategic plan
is based on various projections over time (among them
political,economic,technological,social,environmental,
andlegal),itsstartinglineisexistingconditions.However,
thereisanenormousrangeofchangingcircumstanceswith
consequences that vary over time – the future is not what
it used to be – that can quickly turn favorable operating
conditions into an extremely difficult environment.
Consider the wide range of outcomes, such as interest
rates,thepriceofoil,aBritishexitfromtheEU,therefugee
migration,andcyberrisks,thatarepossiblespanningthe
five-year time frame of 2016-2020.
Embedding the ERM process into strategic and business
planning is not an end to itself. The ERM process supports
the strategic plan, but it is executing the strategic and
business plans with tactical actions that are critical. When
dataandinformationaboutrisksorobstaclesisaddedearly
in the process and decisions are based on that data and
informationyourorganizationwillactuallystarttopractice
strategic risk management. Embedding the ERM process
into strategic planning also is important for growing the
businessbecausetheoppositesideofriskisopportunity.And
afocusonopportunitycanleadtoanimportantcompetitive
advantage within your industry.
Link strategic and business
planning to decision-making
Giving your firm
a strategic edge
BY JOHN BUGALLA AND COREY GOOCH
M D S ma g a z i n e
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7. 101
Current Strategic Plan
fu l l c o v er
Outside Risk Factors
• Political
• Economic
• Social
• Technological
• Legal
• Environmental
The ERM charter
An ERM charter created during ERM planning is an
internal blueprint for both executive leadership and
middle management to follow. The strategic nature of
thedocumentwarrantscreationbyseniorexecutiveswho
have a broad view and power within the organization. At
theveryleast,thechartershouldstatethevision,mission,
and purpose of ERM within the organization. It will set
the tone from the top for ERM in one of two very different
directions: either risk management is a strategic support
function, or it is about audit and control. We believe ERM
shouldbealignedwithandsupportthebusinessactivities
oftheorganization.Riskmanagementshouldcollaborate
with audit and compliance, but not be housed within
compliance, if the option exists.
HalfofthefoundationalprincipalsofERMhavetodowith
“preserve, protect, and comply,” but the other half have
to do with supporting building the business. ERM should
be employed to identify, assess, and address both threats
and opportunities to the organization. More specifically,
the goals of an ERM program should be: (1) minimize the
impact of adverse events, (2) support business growth
opportunities,and(3)enhanceorganizationalgovernance.
Conclusion
Incorporating ERM into the strategic plan will support
growth objectives and minimize the impact of adverse
eventsthatcouldhamperanorganizationfromachieving
its goals. We view ERM as an important component of the
strategic planning process. At Brokerslink, we have the
capabilitiestohelpourclients buildandimplementanERM
processthataddsvalueandgivesthemacompetitiveedge.•
Initiating the ERM process
Adequate planning and preparation before initiating
ERM are crucial. The planning step requires the active
engagement and leadership of the CEO and leadership
team. With the CEO leading the planning sessions, a
constructive dialogue about ERM that will determine the
uniqueshapeandcontourofyourorganization’sprogram
can begin.
An initial planning session with the following agenda is
a good place to start:
• Create an ERM charter: vision, mission, and purpose.
• Identify the ERM leader: Chief Risk Officer, CFO or CEO.
• Identify how best to align the organizational
team that will include the ERM process within the
organization’s strategic plan.
• Define “risk” within your organization.
• Draft an initial “risk register” for your organization.
• Initiate a discussion about risk appetite and tolerance.
• Identify internal and external resources and
collaborations that will bring added robustness to
the effort.
MORE FAVORABLE
LESS FAVORABLE
Operational Time Line 20182016
YourOperatingEnvironment
ERM enhances strategic planning

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M D S m a g a z i n e
COREY GOOCH
→ Corey Gooch is Director of Business Development
at Brokerslink. He joined from Towers Watson
where he held positions as an Account Director, US
Risk Consulting sales leader and Global Corporate
Enterprise Risk Management consulting practice
leader. Prior to Towers Watson, he worked at Aon
for 11 years in their brokerage and risk consulting
divisions and led their London-based EMEA team of
ERM consultants. Corey Gooch has been quoted in
numerous periodicals and has been a frequent speaker
at a variety of international industry conferences. He
holds a B.B.A. with double majors in Finance and Risk
Management from Temple University, and attended the
United States Naval Academy.
→ Based in Chicago, Corey Gooch can be reached at
corey.gooch@brokerslink.com.
JOHN BUGALLA
→ John Bugalla is an Enterprise Risk Management (ERM)
thought leader. He has a 4 decades track record of creating
new value for clients by designing new products, services,
techniques, and management methods.
→ From 2002 to 2014, he was Managing Director of Marsh &
McLennan, Inc. From 1990 to 2000, he held the position of
Managing Director of Willis Corporation. From 2002 to 2004
he was Managing Director of Aon Corporation.
→ Since 2005 he is the managing principal of
ermINSIGHTS, an advisory and training firm specializing
in enterprise risk management (ERM) and strategic risk
management (SRM). The firm advises clients how to embed
ERM into strategic planning and leverage the process to
create new value.
→ John Bugalla is a regular speaker at CEO, CFO, and RIMS
conferences. He collaborates with companies to turn ERM
from a compliance exercise to a value creator.
→ He has published articles in several magazines like
CFO Magazine, Risk Management Magazine, The Risk
Management Association, The Journal of Risk Education,
among others.
→ Based in Indianapolis John Bugalla can be reached at
jbugalla@indy.rr.com.

9. “François’s ethos was that education
and associations would be the only
way to build a harmonised European
risk management culture.”
f u l l c o v e r
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Celebrating FERMA's 40th anniversary.
François Settembrino.

10. In September last year, François Settembrino, creator
of the Belgian Risk Management Association and
founder of the Federation of European Risk Management
Associations (FERMA), passed away, aged 86, after a
short illness. François was Chairman of FERMA for 10
years (1984-1994), responsible for the formation of its
biennial Federation Forum and named the Association’s
Honorary President after his retirement. A former broker
and Risk Manager at Tabacofina in Belgium, François
was recognised as a prolific contributor to the risk
management and insurance industry and described by
his peers and colleagues as ‘the father of FERMA’. Here,
Jorge Luzzi, President of Herco Global and Director
of Risk Management at Brokerslink, remembers this
remarkable man.
François Settembrino was a major influence in the European
risk management sector and for me, a real teacher, both in
my life and my career. He was indeed a ‘founding father’
of FERMA and responsible for its predecessor – the
Association of European Industrial Insureds (AEAI) – which
he launched in 1974.
He started his career in insurance in the sixties, with Belgian
broker, Henri Jean. One of his famous quotes at the time
was: “For everyone a premium is seen as a financial reward,
yet in insurance it is something that has to be paid!” He
specialised in car and personal lines insurance before
moving onto pensions and employee benefits. This was
at a time when many foreign organisations, particularly
from the United States, were setting up their European
headquarters in Belgium. François – frustrated at the lack
of harmonisation across Europe – was keen to help them
establish their businesses and overcome the apparent
cultural and legal differences between the US and Europe.
As a result, he rapidly became known as ‘the European
expert’ on these matters.
François’s ethos was that education and associations
would be the only way to build a harmonised European risk
management culture and this desire to promote insurance
and risk management education across Europe was the
rationale behind the formation of AEAI and FERMA.
R E M E M B E R I N G
François
Settembrino
B Y J O R G E L U Z Z I
After a productive and prolific life as a broker, François
joined a Belgian company as a Risk Manager, developing,
promoting and engraining risk management within its
culture. He worked closely with the European Commission
and in the early 70s was asked by the General Customs
Directorate to set up a European association, representing
the interests of the sector, working closely with insurers and
brokers. This he did with the help of contacts in Germany,
Netherland, UK, Italy, Spain and France.
On a personal note, I first met François in the late 80s.
I was quite young at that time, taking my first steps in the
risk management world. It was during one of the AEAI/RIMS
conferences in Monte Carlo and François was chairing the
opening session. His multi–lingual capabilities – delivering
his speech in six languages – and ability to engage with the
audience were impressive.
François became a reference point during my 35+ years
in risk management and many of the initiatives I delivered
during my time as President of FERMA and the International
Federation of Risk and Insurance Management Associations
were inspired by his life teachings and conversations.
In 2014, we met in Brussels to celebrate along with all
FERMA´s presidents, its 40th anniversary. He was there
quite elegant and as lucid as ever.
François never gave lessons or advice in the traditional way;
instead he gave you ‘food for thought’ and continued to do
so even in his later years. Long after retirement he remained
active within FERMA, working alongside general secretary,
Pierre Sonigo and executive director, Florence Bindelle;
always ready to help, writing articles for the press and
sharing his enthusiasm until his last days.
On July 2015 he sent Florence his last article, quite
funny, but slightly too provocative to share publically. His
accompanying email text read: ’This article is like a Will,
it reflects my thoughts and wishes! See you soon and big
kiss!’ This was his last email.
Thank you François for what you have given to our profession
and all of us within the risk management community. •
M D S ma g a z i n e
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